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As part of a range of emergency measures to
help businesses meet the challenges posed by the COVID-19 pandemic, the
government adopted Ordinance 2020-318 on 25 March 2020. The measures
temporarily extend deadlines in the financial reporting and accounts approval
process of listed and unlisted companies alike.

Extension of time limit for approving annual financial statements

Most commercial companies (including sociétés
anonymes, sociétés à responsabilité limitée, sociétés
en nom collectif,sociétés en commandite par actions, sociétés
en commandite simple and single-shareholder sociétés par
actions simplifiées) are normally required by law to hold a general meeting
of shareholders to approve their annual financial statements within six months
following the end of their financial year. The ordinance extends such deadline
by three months.

In the case of a société par actions
simplifiée that has more than one shareholder, it is the company's
by-laws that set the deadline for approving the annual accounts. The ordinance
also extends that deadline by three months.

The Autorité des Marches Financiers(1) has
stated in a press release(2) that
listed companies that intend to postpone their general shareholders meeting must
inform their shareholders as soon as possible by means of a press release that
is effectively and fully disseminated.

In addition to commercial and civil
companies, the new rules apply to partnerships, cooperatives, mutual companies,
charities and foundations.

Conditions

The time extension applies to only entities
that close their annual accounts between 30 September 2019 and 24 June 2020.(3)

For example, in the case of a société
anonyme, if the financial year ended on 31 December 2019, the deadline for
the general meeting of shareholders to approve the company's annual accounts is
extended from 30 June 2020 to 30 September 2020.

However, there is no extension if the
statutory auditor had issued its report on the financial statements before 12
March 2020.

Management organs of sociétés anonymes

The management board (directoire) of
a société anoyme is normally required to present the annual
financial statements, the management report and the corporate governance report
to the supervisory board (conseil de surveillance) within three months
of the end of the relevant financial year. The ordinance extends that deadline
by three months, provided that the company's financial year closes between 31
December 2019 and 24 June 2020, and on the condition that the company's
statutory auditor had not issued its report on the annual accounts before 12
March 2020.

Accordingly, a société anonyme with
a supervisory board whose financial year ended on 31 December 2019 now has
until 30 June 2020 to present the required documents to the supervisory board.

For sociétés anonymes that
have a board of directors (conseil d'administration), while the deadline
for the general meeting of shareholders to approve the company's annual
accounts has been extended, the deadline for the board to finalise the annual
accounts remains unchanged. Thus, the board has until one month before the
annual shareholders meeting is convened to finalise the financial statements.

Companies in judicial liquidation

For companies in judicial liquidation that
close their financial year between 31 December 2019 and 24 June 2020, the
ordinance extends the deadline for liquidators to prepare annual financial
statements and a report on the liquidation operations carried out in the
previous financial year, from three months to five months from the end of the
relevant financial year. Thus, if a company's financial year ended on 31
December 2019, the liquidator now has until 31 May 2020 to prepare the relevant
documents.

Interim accounting information

Articles L232-2, R232-2 and R232-3 of the
Commercial Code require the management of companies that have at least 300
employees or a net turnover of at least €18 million to prepare certain
financial forecasts and interim accounting and financial documents on a
six-monthly or annual basis.

The ordinance extends the deadline for
preparing such documents by two months, insofar as they relate to accounting
periods ending between 30 November 2019 and 24 June 2020.

Comment

For many businesses, the COVID-19 pandemic
has coincided with the financial reporting season and is inevitably impeding
standard financial and accounting approval processes.

Although the measures are not in themselves
a panacea, they are part of a wider package of support and relief for
businesses and provide companies with welcome breathing space amid the current
crisis.

Click here to go to our COVID-19 Resource Center for more advisories, articles and other content related to the coronavirus pandemic.

Endnotes

(1) The financial
regulatory authority.

(2) See the press
release entitled "COVID-19: The AMF informs shareholders and listed
companies of the exceptional measures taken for the organisation of
shareholders' meetings".

(3) Being one month
after the end of the so-called 'health emergency', which is currently due to
expire on 24 May 2020.